USANA Embroiled in Controversy
Stephen Barrett, M.D.
USANA Health Sciences, Inc. and three of its top officers are facing class-action lawsuits by shareholders who allege:
- Its business model was unsustainable because it required the constant recruitment of new Associates due to a high level of attrition within the its sales force.
- Its multi-level marketing model operated as a pyramid scheme.
- The majority of its distributors ("Associates") did not actually sell to consumers, but rather to other Company Associates.
- Over 74% of its Associates were failing within the first year of joining the Company.
- Over 87% of its Associates were losing money instead of receiving compensation for their sales efforts.
- It lacked adequate internal and financial controls.
- As a result of these things, certain statements that USANA made about its future business prospects lacked a reasonable basis.
In March 2007, USANA reported that the U.S. Securities and Exchange Commission had begun an informal inquiry. The investigation appears to have been generated by a lengthy report by the Fraud Discovery Institute. USANA responded to that report by suing its author for libel.
Pyramid Scheme Alert has issued reports about USANA's business model and the similarities between USANA'spractices and those of BurnLounge, which the FTC has accused of being an illegal pyramid scheme.
Additional Information
- Winstein KJ. USANA sales plan draws fire from felon turned gumshoe. Wall Street Journal, March 15, 2007
- Fraud Discovery Institute Report on USANA
- Kapur v. USANA Health Sciences, Inc.
- Senter v. USANA Health Sciences, Inc.
- Twin Pyramids: An Analysis of Distinctions and Points of Similarity between Usana Health Sciences and BurnLounge, Inc.
- Usana Analyzed: A Case of Corporate Identity Theft
- USANA v. Barry Minkow and Fraud Defense Institute
This article was revised on July 15, 2007.